US House Prices May Take Several Years To Stabilize

The image below comes from the Economist’s daily chart feature, and looks at the YoY change in home prices from 1988 to present:

Graphic courtesy of The Economist

As you can see from the chart it took about eight years for housing prices to stabilize during the last downturn, and that even during a housing boom there can be periods of decline. Aside from laying to rest the idea that housing prices simply always increase in a straight line fashion, it also indicates that it will likely take several years for housing prices to stabilize as opposed to the near imminent bottom that many are always predicting.

More importantly the analysts, politicians, pundits and realtors that are talking about foreclosure relief, putting a floor on the housing market, ending the slide in housing prices, protecting home equity, etc, need to start being honest with people and admitting that housing is a market just like any other. Meaning: prices fluctuate, prices go up, they go down and after a period of hyperinflation the market needs to give-up the inflated gains (and then some) before it can stabilize; and it will may be well into the next decade (if not the 2020s) before many home owners regain the equity lost during the  housing downturn.

It’s not something that any homeowner in the country wants to hear right now, BUT it’s a harsh truth that we all have to accept.

It would be better for the politicians, pundits, realtors, et al to start telling people the truth then to fill their heads with pipe dreams, whilst they attempt to thwart reality and prolong the inevitable.

Disclosure: at the time of publishing the author didn’t own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn’t be viewed as financial or investment advice.

Posted in Categories: Contributor, Economy, External Research, Housing.

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